SW Ring Road Contract Signed

This week the Province of Alberta and Mountain View Partners signed a Design, Build, Finance and Maintain P3 contract for the Southwest Calgary Ring Road project. Proposals for the project, which will run from Highway 8 in Springbank to Macleod Trail at Highway 22x, were invited last September, and in July of this year Mountain View Partners was announced as the preferred proponent.

The agreement will see the contractor design and construct the project over the next five years, and then maintain the road for 30 years of operation, concluding in 2051. The contract has been valued at $1.42 billion in 2016 dollars, while the unadjusted figure has yet to be released.

The Province of Alberta, with support of the Federal Government, will fund the project 60%, while Mountain View Partners will finance the remaining 40% over the life of the contract. Two other bids were rejected: Valley Link Partners with a bid of $1.88 billion and Southwest Connect with a $1.55 billion bid.

This leg of the ring road is expected to be open to Calgary drivers in 2021, leaving only the West Calgary Ring Road project remaining.

CLICK TO ENLARGE. The extent of the Southwest Calgary Ring Road Project is highlighted on the map above in red. The blue section represents the currently-delayed West Calgary Ring Road project. Source: Alberta Transportation.

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7 thoughts on “SW Ring Road Contract Signed”

Thanks for the post. It is good to see that this project in proceeding. The news release says, “Through the 2014 New Building Canada Plan -National Infrastructure Component, the Government of Canada has committed up to 25 per cent of eligible cost …”.
“Up to 25%” isn’t much of a commitment. This could be anywhere from zero to 25%. Why not “the Government of Canada has committed 25 per cent of eligible cost …”? The 2014 New Building Canada Fund: National Infrastructure Component page on the Federal Government website says, “The maximum contribution is 25 per cent for projects with for-profit private sector proponents.” When do they actually commit to the 25%, or some lower amount?

It’s a good question, and I have no real answers on how the Federal funding component typically works. I can say that last year the Federal Government committed $583 million towards the SW Ring Road project, and that commitment that was re-affirmed again this July.

Yes, I see a news report of July 15, 2016http://www.660news.com/2016/07/15/feds-fulfill-pledge-of-583-million-for-calgary-ring-road/
that says “Trudeau announced $582.9 million in federal funding for the southwest portion of the massive project …”. The project present value, including 30 years of road maintenance, major rehabilitation and capital cost, is $1.42 billion. 60% of the capital costs would be paid during the construction period and 40% would be paid in equal monthly payments during the 30-year operating period.

If the federal contribution were 25% of the capital costs, the total capital costs would be $582.9/0.25 = $2332 million. This is impossible as it is more than the value of the bid! The $582.9 million is 41.0% of the total bid value. I wonder if the Feds will now reduce their contribution to 25% of the capital component of the bid value, which would be significantly less than 25% of the bid, or $355 million.

I reply to a question about discount rates, Alberta Transportation wrote to me “Alberta Transportation will prepare a Value for Money Report for the project which will contain financial information such as the discount rate used to evaluate the bids.” Here is a link to the Value for Money Report for the most recent P3 project, the northeast leg of the Edmonton Ring Road:http://www.transportation.alberta.ca/content/doctype353/production/VFMAHDNE.pdf

It shows the inflation rate assumed was 2.15% and the discount rate used to evaluate the present value of the bids was 3.75%. Unfortunately, the report does not break out of cost of the components of the project; capital, rehabilitation, operating and maintenance. I would be nice to know what portion of the bid was for capital costs.

Are the other bid details available anywhere? I’m interested to know why bid was $460 million higher than the winning bid. That’s a huge difference. Did they offer to do more or was the project scope and details firmly set?

The details of the different bids have not been made public at this time, though I will post details if they are ever released (though I don’t believe that the failed bids for the SE leg, for instance, were ever made public). I understand that the scope of the project was fairly constrained.

As it currently stands, the section between Highway 8 and Highway 1 is delayed indefinitely. The City is looking into how this will impact Sarcee Trail as it would be the logical connection between the ring road and the Transcanada, and is developing road projects that aim to mitigate downstream impacts from this missing connection. I am hoping to see more information about this from both the City and the Province over the next few months, and I will post notice of any open houses when I hear about them.

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Welcome to my Southwest Calgary Ring Road site. It serves as a resource for historical and contemporary information regarding this road, and the issues that surround it. Check out the Timeline (in the menu at the top of the page) for a good place to start, look at the list below to see all of the articles, and click on links within the articles to see more on any topic.